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Shares, Property or Cash

If you talk to someone in the Real Estate industry, they will often tell you that Real Estate is a better investment.  Conversely someone in finance will typically recommend an investment in Shares as your best option.  We all need to hold an appropriate amount of cash to meet our short-term expenditure needs, or to allow us to take an advantage of a Real Estate or Share investment opportunity should one arise.  The reality is that investing in real estate, shares or holding cash is a personal choice that depends on your financial situation, goals, risk tolerance or investment style.

As individuals, we will often be drawn to what our financial mentors may recommend.  More conservative investors will be attracted to cash due to its stability and liquidity.  If our parents, colleagues, or friends have experience in the real estate market we may find that easier to grasp.  Similarly, others may be surrounded by people with a preference for share investing.  It is important to note that many Australians will typically have a strong real estate holding in the form of their home, so diversifying into shares or cash may be worthwhile.  Others may also have strong shareholdings through their superannuation which needs to be considered.

Some common pro’s and cons of each option are listed below

SharesPropertyCash
ProGood liquidity
Simple diversification
Low minimum investment and low transaction fees
Passive income
Tax advantages (negative gearing)
Easy to access mortgage finance
Excellent liquidity
No volatility
ConMore volatile than real estate
Large number of options can lead to analysis paralysis
Higher minimum purchase price
Higher management / maintenance requirements
Poor liquidity, high transaction costs (stamp duty / conveyancing)
Value discounted by inflation

The reality is that there is no one size fits all recommendation.  At Fleming Financial Planning we will spend time with you to understand your financial situation, goals, risk tolerance and investment style, so that we can provide you with a recommendation that suits your needs.

Source: www.investopedia.com

This website contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.